HDFC Bank: Impact of $127 Billion Foreign Currency Deposit Mobilisation on Liquidity and Lending Capacity

Indian banks raised a record $127 billion through Foreign Currency Non-Resident (Bank) deposits between June 8 and August 31, 2026, giving the banking system a sizeable pool of medium-term funding at a time when loan growth had been running ahead of deposit growth. 

For HDFC Bank, the development adds to a more supportive funding backdrop rather than representing a standalone capital event. 

S&P Global Ratings said the mobilisation, equivalent to about 4.5% of the banking system’s deposit base as of March 31, had eased funding pressure and improved liquidity across the sector. The deposits carry tenors of three to five years, which also helps banks lengthen the duration of their liabilities. 

The mobilisation was made possible by a Reserve Bank of India measure under which the central bank absorbed the full hedging cost on the principal of eligible three- to five-year FCNR(B) deposits. That allowed banks to offer higher rates on dollar deposits without carrying the same currency-hedging burden. 

HDFC Bank was among the private-sector banks that stepped up FCNR(B) mobilisation during the window. Industry data reported after the scheme closed showed private banks accounting for a large share of the inflows, with HDFC Bank among the major contributors. 

What matters for HDFC Bank now is how that additional liquidity sits alongside a recovering loan-growth profile. 

The bank reported loan growth of 15.6% in Q1 FY27. UBS noted that around 42% of HDFC Bank’s branches are less than five years old, leaving room for those branches to contribute more meaningfully to deposit mobilisation and customer activity as they mature. 

S&P also pointed out that the impact of the FCNR(B) scheme could extend beyond the headline $127 billion raised. Because some customers borrowed against deposits and placed the proceeds into FCNR(B) accounts, banks’ balance sheets could expand by more than the deposit amount itself. 

S&P estimated that the overall increase could reach about $190 billion to $220 billion if 50% to 75% of the deposits are leveraged through loans against pledged FCNR(B) balances. 

That does not mean HDFC Bank alone will see a comparable expansion. The estimate applies to the banking system as a whole, and the bank has not disclosed a separate balance-sheet impact from the scheme. 

For HDFC Bank, the more relevant takeaway is the combination of system liquidity, a larger pool of medium-term deposits and an improving loan-growth trend. 

With loan growth already back in the mid-teens and a large share of its branch network still relatively young, the bank enters the next phase with less funding pressure than it faced before the RBI’s FCNR(B) window opened. 

The $127 billion mobilisation therefore changes the backdrop for HDFC Bank rather than its business model: it improves the availability and duration of funding across the sector, while the pace at which that translates into HDFC Bank’s lending growth will depend on its own deposit mobilisation, credit demand and balance-sheet strategy.